Stacks: Is Bitcoin DeFi Overhyped, Underrated Or A Pipe Dream? | Muneeb Ai

Transcript

Bitcoin changes very slowly and it might be four or five years until any op codes or Roll-Ups are introduced so I think Stacks could actually evolve over time where uh in the time between now and when the new OP codes come it starts looking like what's called a sovereign roll up and one of the big properties of a solvent roll up is that it has a hundred percent of reorder resistance of Bitcoin all right everyone welcome back to another episode of zero X research brought to you by the atom accelerator if you're a developer looking for a home in this industry the atom economic zone welcomes you you will hear more about the atom accelerator later on in the show we are recording this episode on

June 20th and we have a great interview coming to you with new nib Ali the co-creator of stacks which is a Bitcoin focused scaling solution aiming to onboard hundreds of billions of dollars of idle Bitcoin into defy before the interview we are joined today by Ren and Xerox pibbles to discuss what's going on in this industry um but before we even jump into that I want to I want to do a little new segment alert uh kind of hitting some D5 governance updates uh which again our tool gov Hub makes this super super easy so I'll just do some quick hitters here and then maybe if we have some thoughts on on any of these three different protocols and what they're doing we can kind of Jive on on some of their updates but real quickly we got maker Dao which officially pushed their DSR update that

went live yesterday on Monday the 19th and so the DSR has jumped to 3.49 percent and that basically means that you can earn on your doc you can earn more die on your die right this is basically an interest rate um so you've seen three and a half million deposited into the new SDI contract um and Spark protocols debt ceiling also jumped from 5 to 20 million dollars we did an episode I believe that was last week that uh with Sam McPherson the founder of spark protocol really diving into kind of what the implications of this are but really it's just kind of awesome to see you know that kind of being pushed live in real time uh similarly with uh another protocol are they we have go maintenance

approaching launch so the like last piece of the puzzle that we were waiting for before go could really kind of Hit the on-chain governance vote was Ave companies kind of coming in and posting like hey you know we think this is this is ready for production ready to go live we got that post from Ave companies 14 days ago in the governance forums um so it feels like sufficient time has passed uh for them to kind of push that to an on-chain vote so it feels like any day now we're expecting to see that uh kind of push on chain and go will be activated so super exciting there and lastly we have osmosis there's a ton of things going down with with osmosis I think it was uh Westy the other day over like pinged our analyst chat and was

like all right what's going on on govhub I see four osmosis high priority Flags what is this we're ready to give David [ __ ] for uh just bragging about the you know being a cosmos Maxie but sure enough there's a ton going down over there uh so we have an updated inflation schedule a change to the community pool allocation in terms of inflation which has been basically reducing the amount of inflation going to the community pool with more flowing to LPS and sakers supercharged liquidity pools are coming there's a big discussion around that as well as a protocol taker fee on swaps so really trying to start cranking the protocol Revenue aspect which makes sense for an app chain so yeah that's that's kind of three protocols three major announcements uh kind of all

related to D5 governance again really highlighting the importance of defy governance because my goodness there's a lot going on so curious if you guys have any takes on any of those developments I'll start off with I think obviously having stable claims to generate interest is good but it'll be some time before it gets adopted throughout the wider ecosystem I think similar to for example liquid sticking tokens for youth like both of those will slowly increase in the percentage of like interest bearing versus non-inches fairing tokens and it just makes sense from like a capital efficiency perspective and there's like a lot of protocols that are off incredibly used but not exactly in the permission this manner and make a Dallas kind of a method to get access to those quote-unquote treasury used in the

permissions managed so definitely like a good move from them and then on Ave I think it's quite interesting seeing the different levels of hype between curved USD and RV go right like USC is getting a lot of money on Twitter they have that new fancy lava and soft liquidation mechanism whereas avigo has been a relatively quiet I haven't heard anything about avico to be honest um and it's quite surprising coming that at one time it was like a very core part of like the strategy to increase in front of our Revenue yeah it'll be interesting to see the implications of goes launch 2 with the DSR like you'd think a move might be to Mint go and then you know Swip it swap it to S die to just collect

that three and a half percent at the detriment of the maker Dao I'm so curious to see how that plays out going forward and on the osmosis front a lot of big upgrades doesn't really surprise me given all the heated competition over in the cosmos landscape you have Astro Port dydx is moving over there soon um obviously astral proton neutron so definitely not surprised to see sunny in the osmosis team um kind of ramp things up over there yeah you actually mentioned a great point on like the the looping trade if you will of using sdi's collateral on an ulterior uh platform and and minting a stable coin against it right so go is launching with a one and a half percent yield uh and or a borrow rate excuse me so and S die currently has 3.49 so you can kind of loop that

trade and try to capture the uh the spread there which is pretty interesting to think about but uh yeah I don't know maybe we can uh it'd be fun to watch that one as well especially considering curve is considering the the same thing right you can mint CRV USD against SDI uh so definitely interesting collateral choice and I think that'll lead well that's kind of just like leeching onto the yield of rwas through maker Dow it'll likely through the PSM and like Arbitrage through the PSM will increase the amount of usdc that maker Dow has to go kind of continue the deployment of of capital into these rwas so be really interesting to watch this one play out maybe we can kick it over to a little hot seat cool Throne uh Sam maybe I'll

start it off with you my man yeah I've got a good one actually uh finally some good news on on the Block for the hot scene cool Throne segment so obviously we saw a pretty big pullback with the SEC suing coinbase and binance but we've pretty much completely retraced that move and in my opinion it can likely be attributed to uh the moves coming out of Trad five so we saw BlackRock file for a Bitcoin spot ETF after shortly seeing rumors that happened like 12 hours later last week on Thursday or Friday I believe it was and then we also see rumors floating around that Fidelity is looking to file a spot ETF as well and uh AP underscore Abacus on Twitter so take this with a grain of salt because these toys tweeted some false rumors

before but he did say that Fidelity was potentially looking to convert the grayscale Bitcoin trust into an ETF and that maybe they'd put a bit in there so that's definitely something to watch going forward and then we also saw Citadel Fidelity and Charles Schwab uh finally launched the edx exchange that was talked about about nine months ago so that's launching later today it's actually pretty interesting it's not a custodial exchange it's literally just designed to facilitate trades between Fiat and four digital assets so eth Litecoin Bitcoin and Bitcoin cash so it's likely that a lot of retail brokerages will root trades through edx in order to provide exposure in a brokerage account to digital assets so I

think that's honestly two really bullish uh news points and I don't think they should be overlooked I know we get all kinds of hype news that ends up being a nothing Burger but these two actually feel like they have some legs so I'll be watching them closely going forward into the rest of this year yep it's super interesting seeing all this positive news for Bitcoin if you look in the market right now you can actually see Bitcoin dominance is edging over 50 percent for the first time in quite a while so it's kind of like a return to fundamentals I think overall it's looking like a good direction for chat by a few nice things to know um for the BlackRock spotty TFW partnering with coinbase custody they'll also be partnering with NASDAQ um as a specific

segment in the falling that says specifically how they're going to alleviate sort of the market manipulation concerns that have traditionally been sec's argument against the spot Bitcoin ETF and also there's a fun tidbit of information I saw on Twitter that BlackRock has a successful like ETF product history of 575 to one so the statistics and probability are looking pretty good and another thing for the Fidelity and Charles Schwab I don't know how much access their users get to like crypto today but in between both of them they have around 11 trillion dollars worth of assets on their platform which is a lot you know that's like 5x the

crypto market cap today and so there's potential for infos there especially if retail wants to trade as a caveat too on that point Ren I think the one ETF that BlackRock didn't get approved was an ETF that basically they wouldn't have to report on what was being held in the ETF for like a long period of time so that makes sense that that wouldn't actually get approved obviously investors deserve to know what they're buying so that's just another interesting caveat and then I also find it kind of funny that that the US is just continually siding with bitcoiners when in all reality like you know bitcoiners are like the most anti-establishment segment within crypto they get they're like yeah yeah you guys are fine like let's push through like a

Bitcoin spot ETF potentially and like do all these things and allow Bitcoin trading and all these different venues and all these other things are bad but really like it's bitcoiners who are like no like government controlled money is bad like we should go against the nation state so it's just kind of ironic that the US is ultimately siding with the bitcoiners but uh Dan what do you got on the hot Cedar culture on this week yeah I loved that one Sam but I got I got the op sack on the cool Throne this week I've been a lot of development going on over there without a doubt and you know they recently pushed the Bedrock uh upgrade which had about 50 to 60 Savings in terms of gas costs for users when compared to the Legacy system and it also pushed a discrete two second block

time so it was seen a lot of interesting traction going on over there and you know as a user of optimism I personally have noticed a much better experience I used to complain about quality of the execution over there and I've honestly been super happy with kind of how Bedrock has changed that so love to see that and then more interestingly we've just saw binance announced op BMB which is their scaling solution based on a fork of the op stack um the this is I put them in the hot the cool Throne just because you know this is definitely like a nod towards the quality of the op stack is is you know when people come in and say you know you have open source code I love what you're doing I'm going to Fork it and use it and

you know it's it's really interesting to see bias kind of choose that architecture of the other existing architecture architectures um and they're taking a very interesting stance as well by leaning very heavily into the gaming industry it seems like that's kind of the the wave that they're trying to attract which is interesting because personally I I want uh I want crypto gaming to work so badly just as a gamer at heart and uh you know obviously passionate about crypto I'd love for the two to be fused together and I just like yearn for the idea of an on-chain RuneScape but you know we'll get back to that another day um in the evening included things in there on their post uh like you know mentioning how OPB will be tailored to the specific specific needs of gaming workloads optimized for fast transaction

finality and support gaming focused features or customizations so really making a point there um and also another interesting thing they did was really crank up the gas limit from 30 million which is what the op stack on ethereum currently uses to about 100 million so really cranking that thing to the max which is similar to what they did with BNB consensus itself um my interesting thought is like okay will this be compatible with the super chain on ethereum I I actually don't know the answer to this so I don't know if anyone like any of you guys do it I'd love to hear it but it is like based on the same Tech um but I don't know if that music can natively be compatible so the question I guess here is like you know optimism pushed out this great

open source Tech and somebody came along and forked it that being bidance and now they're using it at their own benefit with uh really no reward going back to optimism for producing that great Tech and like sure it's a nod at the Credence and it will help bolster the strength of the the technology with somebody else using it and pushing it to its limits um but there's no like direct compensation for optimism so it's kind of curious and interesting to kind of see that those Dynamics play out in real time yeah I'd probably say like the more chains that end up using the op stack and building over there the better even before an interoperability standards actually established like you know the more activity that's over there the

better and I think eventually they'll figure out the interoperability problem I know a lot of other teams are working on solving that for that ecosystem as well so I think it's ultimately bullish op who knows if it actually results in anything directly for the Dow but I think just the more users more activity Etc using roll ups on ethereum the better this still settles down to binance chain so it's not it's not using ethereum as the settlement like it's truly a fork and then an L2 sitting on top of BNB okay that I did not realize that's that yeah okay I don't really know about that then take back my take on that it's interesting because you know like they've kind of like long cut not copied but been inspired by some would probably

argue copied the ideals going on over the in the ethereum community so now it's it's no surprise that they have the need and desire for scaling Solutions as well um which is yeah why I like I'm just really interested that they chose the op stack I I would love to kind of peel back more layers with that team and see you know what led to those decisions likewise I think I mean the Envy chain is ass centralized of a blockchain as it gets like they run underproof it's already half like a super small battery data set which I would guess is mostly run by Finance themselves and so it's interesting that the choosing to open stack as a skeleton Edition when they probably could tune that blockchain like however they wanted to and just scale it since it's like a more so a centralized

database in a decentralized blockchain I think one of the interesting things is that a lot of these like protocols that you're seeing launching their own applicant site Evo was the first like they're using the op stack one's an outlier two is a trend a third one and maybe like you start getting like a semblance of like networking effects and even though none of that value occur goes back to like the op token itself that Network effect is still valuable you know like Network effect is a lot of the time how something gets like like value accrual in sort of like a token sense and so even if none of that value occurs directly to the Token I feel like that does that to me add to like

evaluation of the token or how people evaluate that token pure speculation here but what if all of the activity from BNB chain which is quite a bit admittedly a couple different categories from Dex activity to stable coin activity um to just daily active addresses in general which of course is a questionable metric but what if all of that activity shifted onto the BNB op or opbmb the roll up and then that roll-up was able to successfully migrate to using ethereum there we go there's your conspiracy of the day that's an interesting one and it also kind of reminds me of uh polygon honestly they kind of just copied the uh the the cosmos SDK and wound up turning it to a really successful thing they got lucky

with timing with each fees getting so expensive in 2020 2021 but nonetheless it kind of there's some similar parallels to draw from it for sure yeah that's super interesting and then I'd like to point out for optimism we also have a16z who's going to launch a roll up with OP stack you've got World coin he's going to launch roll up with the op stack and you have base so um bullish optimism like not necessarily the asset but I think optimism is poised a lot better for adoption than arbitrum is and optimism also is prettier as far as their branding goes those are the metrics that move the needle pimples he got in the hot Cedar cool thrown this week yes I have my favorite protocol

good old frax um oroboros Capital popped up in the governance forums and he's trying to modify fip77 which was a proposal that passed in like Q3 of last year which authorized a 20 million dollar buyback of fractures tokens um because they said it was undervalued and it was also for just like General like price protection I think they've used like maybe like 25 30 of this um so far since like November and arboros came in and this is It's funny because he was Bull posting fxs a ton and he started like buying it like

above six dollars you know a couple weeks ago and you you see that happen and then you see him come in the Forum and he's like hey we need more aggressive BuyBacks because he's underwater so um he's trying so in the past the BuyBacks have been they're all done through Frack swap which uses a T1 and they've usually been executed over like three to six months and oroboros came in and he's like we need to execute these over 30 days um so like any time like he wants a couple million to be deployed if fxs hits five dollars over 30 days and same if it hits like four dollars and then likewise those BuyBacks would get halted

as the price recovers um so everyone's just kind of like arguing in the forums as usual about like what the exact parameter should be and whether BuyBacks are the right thing to do right now when they should be focusing on getting their collateral ratio up to 100 because right now it's like 94.5 percent um so yeah that's my hot seat it's been super fun watching all the discourse go down you know what they say field and chill baby now it uh it is kind of interesting that you can just like label that active uh active investing right go buy a bag and then hit the forums to uh request more

aggressive BuyBacks I don't know definitely seems a bit suspect but uh I think I think the the frax team is well aware of the the short-sightedness of you know somebody who's actively trading I did see him like kind of crowdsourcing the ideas and a lot of them had to do with like you know well I'm looking for an asset that has been hammered on purpose so like that you know that leverage can return When markets heat back up so yeah definitely just a short-sighted short-term uh trade trying to be executed which I don't know to no one's fault of their own I suppose you always see people if you see people talking about fxs on Twitter they're never talking about like how great it is

it's always like this heated like you have to defend yourself if you like fxs and you have to defend yourself because of the price action of it never actually continuing to go up so like these BuyBacks over time have kind of just been exit or they've been yeah I guess extra liquidity for early investors or people who locked up for like two to four years and they're just on their way out should we be putting effort capital on the hot seat for his take on frax being the next sushi yeah absolutely they're making 10 to 20x the revenue that uh anything in the cosmos ecosystem is so

um when osmosis makes more than 300 in Mev in a month then uh we can actually have a discussion I follow this uh osmosis bot like I never bought on Twitter that like automatically reports so you know like the daily Med and yeah it's always like 250 bucks or something like that so I think that's a pretty fair take bubbles unfortunately uh effort's not here to defend himself though so we'll we'll kick it over to ran for his hot Cedar cool Throne all right this week I got Vidal in the hot seat as part of a sort of rebranding initiative from bit down they're going to be converting the bid token to manto so for those that don't know mantel is going to be sort of this new ql2 solution that the Dallas

building out and so as part of that rebranding they're going to be doing a token conversion process for every bit token you have you will get one Mentor but here's where it gets interesting as part of vip21 the community voted to accelerate all of VIP trading contributions and bid down large vesting schedules so that basically means all of the supply becomes circulating in one day whenever that token conversion happens as a point of reference the market cap of it is 752 million the FTD is 4 billion so that's a lot of like uncirculating Supply but it's important to note that basically all of that 3.2 billion that's not circulating is held

in the bid Dow treasury today beta has one of the largest treasuries in out of crypto just looking at deep down today they have 3.2 billion and a large majority of that is in the bid token and it's only sort of hidden by origin which has a treasury of 3.6 billion but there's like a bunch of stuff and like uh going and snapshots that isn't that confidence inspiring for example the mental core contributed team shall be authorized to determine the optimal timing and sequence for the delisting of vid tokens listing of m t tokens of ending of conversion channels and the mental Network mainnet feels like there's probably some investors or has

buyed in there that are sort of smuggled in to get their investing accelerated to and another thing is that previously the beta approved sort of like a different contribution contribution schedule from private so they used to have a dynamic trading volume contribution schedule to bet out but now it's modified to a fixed schedule so it feels like there's some Shenanigans here but I I can also buy to take that like they want to be ran away from being associated with five bit the bid token they want to sort of align themselves and their growth with the L2 mantle and open up a lot more of the token for sort of like growth

initiatives so I think you can see both sides of the argument yeah and this is something like Barbie always like people whenever regulatory action comes down or like fud comes in heavy people are always like buy bits next like look at buy bit or your private withdrawals working and it's like yeah even with that massive buyback they did in December January people were like this is just excellent query for all the people who have bit tokens but these dudes are like generally pretty positive some players like I don't really worry about them at all like doing anything crazy because they always just make sure that they have all their bases covered so go for it have a crazy evaluation with your brand new token ticker and

sell some but like they're not going to Nuke it to zero yeah I tend to agree with that Tech Pebbles they do own I think like 60 of the bit Supply so now MNT the mantle conversion which is a bit concerning but they also do have a treasury that's like I mean it's it's definitely the biggest in crypto I'm pretty sure I mean it's got like 300 million of stables and 500 million of Youth outside of the Native token balance and I also like the move to actually provide a product for the token to stand for and and for people to Rally behind because like at this point like what are you even buying like when you buy bit like you're just kind of confused it's like okay so I have ownership in this dowel that's kind of controlled by buy bit but there's massive treasury inflows at fixed

intervals so it's kind of bullish but there's no product so I don't know I like the conversion I'm just not sure on the accelerated resting schedule that's a bit fishy to me all right well I feel like that's a pretty good time to kick it over to the interview but before we do that as always Dan you want to tell people what's good with the atom accelerator the atom economic zone is really becoming a place for developers to build it's an increasingly attractive environment on it for a number of different reasons you know largely driven by the idea of replicated security simplifying the the effort it takes to really spin up uh an app chain and be be a part of this ecosystem and we really have the idea of Adam becoming money um becoming the Forefront of discussion and the power of IBC giving you the

flexibility of interoperability you know there's an increasing probability I feel like that with each passing day IBC will likely become this uh you know the the interop standard for all of crypto I think effort Capital uh we kind of shoot on them earlier but I think he's pretty pretty on pretty on par with that one um Neutron now has over 14 million dollars of tvl which is largely driven by astroport and interestingly enough Astro Port over half of their tvl has kind of migrated to Neutron so we're already seeing some early signs of popularity kind of kicking off over there and the liquid staking narrative is only getting stronger especially with stride really pioneering what that means means for liquids what liquid staking means for all the cosmos ecosystem and

Native usdc is surely coming soon via Noble which would be a huge unlock to have that one trusted source of value when it comes to stable coins and you know well there's always a debate between centralized and decentralized Stables of course but native usdc is is you know often heralded for its ability to remain pegged to one dollar and it's kind of a necessity in some regard to have that native form of of stability within a defy ecosystem and so if you think that you know you have some value to add to the cosmos ecosystem specifically related to the atom economic zone the atom accelerator is looking to fund you with a grant ranging from 10 to 1 million 10 000 to 1 million

dollars on a rolling monthly basis so we'll put their Link in the show notes and please do be sure to check out that website now on to the interview with nunib Ali the co-creator of Stax all right everyone we are joined today by munib Ali the co-creator of Stax which is a Bitcoin focused scaling solution looking to make Bitcoin a more productive asset thanks a lot for joining us today munib we're super excited for this conversation and I think it's a great starting point to just kind of break down you know what Stacks is and what what what's like the primary problem that it's working to solve um so the platform's been live for two years now and I'd love to get your take to exactly that question like what exactly are you building Stacks to solve I think the most simple way to think

about this is It's a Bitcoin L2 both for scalability but more importantly for new functionality because we don't have full fully expressive smart contracts at Bitcoin L1 and like ethereum does or Solana or other chains do and I I think Bitcoin to me is a settlement layer and most of the actual use of Bitcoin would actually happen in l2s like like lightning for payments or Stacks or more advanced smart contracts so basically imagine the kind of things that people are doing on ethereum today like using civil coins or decentralized exchanges or liquidity pools all of that can happen with BTC uh in Bitcoin l2s and that's that's really what status awesome

and when I think about uh Bitcoin is like the L1 that feeds l2s the first thing that comes to my mind are the 10 minute block times how does that factor into kind of the design decisions you're forced to make and um what are really the implications of that versus you know using ethereum as the example where you have a 12 second block block time yeah so that was one of the first uh the biggest kind of like feedback from developers that we have been getting and uh first of all I think Stacks is a very sort of like decentralized ecosystem which is uh it's kind of like interesting that you know a lot of projects sort of like say that it's a decentralized ecosystem but behind the scenes they're typically like one big company that is that is doing a development and stacks is so

decentralized that it actually confuses a lot of people in the industry when when folks from different companies are so like trying to work on it they're like who are you why are you working working on Stacks so just a little bit of a background there that um uh the mainnet launch in early 2021 and one of the biggest feedback items very very uh quickly after the mainnet launch was the Bitcoin 10 minute walk times because I don't think it's just a 10 minute walk time it could sometimes be 30 minutes or 60 minutes right so it's also unreliable so you don't know know how long you're waiting and I think that that is problematic and um so what would what the sac ecosystem is now doing there have been a bunch of

different proposals but I think the proposal that's to me at least seems like has some of the most amount of support and it would actually go through in terms of implementation is this concept of like Fast blocks and um the idea being fast blocks is that if you can prove that time was passing in between two Bitcoin blocks so there's a cryptographic proof that in between two Bitcoin blocks time passed so then you can start to differentiate between a Bitcoin block that happens within a second or after 10 minutes or after 30 minutes and so on so you can actually the L2 in key processing or transactions let's say in this proposal they're targeting like a five second block time

so every five seconds there's a new L2 blog for stack cell two and depending on whenever the Bitcoin block comes all of those those transactions blocks they get settled on bitcoin so from a ux perspective I think it will be a huge event for the users for everyday users who are used to ethereum or other places uh without impact in Bitcoin decentralization right like so you don't need to change Bitcoin at all and this work um I think there has been a bunch of progress on implementing this vdf so vdf is a very fireable delay function which enables these cryptographic proofs of asset of time but the upgrade is scheduled to go live with what people are calling this Nakamoto release which is a big upgrade to the Saxon too right

on okay and and so kind of again comparing it to the ethereum landscape or honestly the kind of the ll1 landscape as a whole one of the biggest challenges is really bootstrapping an ecosystem around a programming language so of course solidity kind of has the first mover Advantage there and that's what powers the ethereum ecosystem but then you see chains like Aptos kind of pioneing their own or their fuel and fuel the fuel VM they've kind of been talked about the the challenges of bootstrapping that ecosystem around a certain programming language so Stacks is using Clarity kind of how is that how is that that challenge been presented to you and how do you feel that the resources around Clarity have been built out yeah so I definitely acknowledge that it is

um it is hard to bootstrap in the ecosystem around any language that is not um not kind of like Surah D and ebia right so if you're EDM compatible you're sort of like in one one part of the world in the landscape and if you're not even compatible doesn't matter which language it is really I think the particularity doesn't matter is basically if you're non-edm then you're in a in a different League uh so I would say the examples of successful ecosystems that are non-avm the number one would be sold out uh it's non-evm still it was able to bootstrap like that critical mass or developers liquidity partners and and so on so I think that's kind of like the success case example but I do think there are other other

places that are not even compatible and um it's a it's more challenging so then I would divide the challenges into two parts one is like just developer traction that our developers coming are they building uh and then the second is sort of like these Integrations uh with different third-party different liquidity providers and so on and where I see the ecosystem right now uh is that I think that developers are able to overcome that hurdle uh rather like with some effort right and some some developers love the language there's a reason why the designer kind of like picked it uh it's it's safer right it's it's uh decidable meaning um you can easily reason about the what

the program is doing but even I would argue it has better ux like if you if you use try using for the end user if you try using maramask uh it is effectively there is a compiled piece of code that is sometimes shown to the user and then it's like you have to click accept or not like whatever this code is doing it's scary as hell right like I would consider myself a pretty Advanced uh computer user and then it's scary as hell that I have no idea what this code is and even if you show me the same piece of compile code online Ledger or treasure I still have no idea what it is and what it is it is doing but I'm just I'm just like yes I'm trying to make a transfer or trying to make a

trade or whatever uh whereas because Clarity is not compiled and it has these post conditions you can actually surface very useful information to the user that do you want to move these tokens and yes or no right so I think there are some benefits that are actually really good for ux as well uh and usually you don't care what language people use to to do all these things so I think if you just look at Raw data there's something like 60 000 smart contracts published on on the attack L2 right now obviously it's not as much as ethereum which the numbers in millions but it's still 60 000 right so I think some of the developers have been able to code build these things and they dry it like it

might be a smaller Community but they really really like it I do think it's a bigger challenge when it comes to third-party Integrations uh because over there uh let's say it requires them a couple of weeks to integrate the evm chain but it requires them like six months to integrate something that is uh and over there my thinking is mostly that if the carrot is big enough they'll do it right so if you truly unlock Bitcoin Capital which is kind of like the biggest thing uh if if there's a lot of BTC Capital that is flowing in there's a tons of kind of like Market opportunities then they'll go to the effort and putting put in the wall to

actually do it but yes it's a challenge I love getting your perspective on all that that's super interesting Insight I think it'd be pretty helpful we broke down to like kind of core components of stacks and that's Bitcoin settled transactions and atomic swaps can you walk us through really like what exactly both of those are and how they work and maybe we can start with Bitcoin settled transactions yes so I think um our sort of like the world Bureau of uh people in this on the stacks Alco ecosystem is Bitcoin is the source of Truth uh so I sort of like view Bitcoin as like if Bitcoin dies the rest of the industry would it would be questionable that the rest of the industry can

survive uh like if the price of Bitcoin goes down everything else goes down even faster uh so I think if you look at Bitcoin as a source of Truth the ultimate thing the the the Bedrock on which you're sort of standing on then by settling transactions to bitcoin you're almost like saying that if they're later on there's some sort of a conflict and people don't agree what happened uh on a chain or L2 whatever you want to call it uh then you can always go back to bitcoin so what happens with with transactional Stacks right now is that let's say you do a thousand transactions uh on sax in a block when a Bitcoin block comes uh those are kind of like settled on bitcoin and and the interesting property for an end user is

that if you're booting up a new node uh for for stacks you can look at the Bitcoin history and independently verify that you are on the correct version of the chain right this is the property that Google state does not have right uh this is one of the big differences between proof of stake and proof of work that a a node can independently boot up without trusting any other part and stacks actually maintains that property because of this settlement on bitcoin because a professional can boot up you don't trust anyone on the planet you first build the full Bitcoin chain then you build the full chain history of the stack cell too and independently as independent user

you're going to verify that this information is correct so I think that those are the type of benefits that come uh with with settlement on bitcoin and then uh one benefit that I'll mention which is not there today but it is very closely related is the concept of reord resistance right so for uh security of a chain a chain is roughly as secure as as hard it is to kind of like come and reorg the data change the transaction or granular blocks and so on so for Bitcoin it's the proof of work security we know it to be the most secure chain and right now stack has a separate security bugger meaning that if someone wants to reorder the stacks blocks even if they are

committed on bitcoin you can come and sort of like uh with enough money and and resources you can you can there is a security budget that if you have more budget than that you can reorder the stats chain without reordering Bitcoin and in the next version that is changing to 100 of Bitcoin security which is sort of like a benefit of this settlement that okay you're already settled the transaction on one Bitcoin now instead of having these protocol rules that are looking at the stack security budget which is a separate thing why don't we just look at the Bitcoin hash power and the Bitcoin finality and use that for reorgan resistance that for someone to do reorg uh reorg.pl2 they would have to attack

the L1 and they'll have to basically reorg Bitcoin which I think is a much stronger benefit because now if something if your transactions got confirmed on L1 and and they got settled on Bitcoin now you can say with a straight face that hey if an attacker wants to come in and actually undo this transaction or reorder it they would have to go and attack Bitcoin which which I think is a much much stronger security guarantee uh which is which is going live within water release there was a part two of uh your question as well in terms of one was the settlement and I think there was there's a part two as well the atomic swaps yep yeah something for for Atomic stocks uh it's effectively the way uh the stacks to build is

um it has full visibility into Bitcoin transactions now so if you run a Stacks node you're sort of like also running a Bitcoin and and stacks has full visibility into what's happening on bitcoin if the transaction happens with Bitcoin it can actually trigger a contract uh to do something on on the stack side and and by using this property people have built the atomic solves uh one example for that would be uh the magic bridge I think uh uh some people some people have used it and the idea is pretty interesting that you have BTC and you want to swap your BDC with an asset that's on on Stacks that's let's say there's a stable coin right um there's a stable coin that lives on

the stack cell too and you have your BTC and you want to go from BTC to a stable coin in a fully decentralized way that's actually possible today because uh because Stacks didn't read what's happening on bitcoin so the way that magic swap or Atomic swap works is that you would effectively send your BTC and you know that uh my Bitcoin would be only taken away from my ownership in the same sort of like transaction in which I'm getting the other asset otherwise the entire thing will fail and so that's why it's Atomic Atomic swap uh and I think that that's super interesting because uh that can enable all sorts of use cases around around BTC right using L1 and this is Bitcoin

that's on L1 right so Bitcoin sort of like stays on L1 for you um and a related work is just trying to move BTC from L1 to L2 uh which is a ton of focus in the system right now my company first machine is actually uh pushing that forward because we have a business interest um in that applications that we are building need spdc spdc is different from Atomic law uh Atomic Atomic software sort of like your BTC L1 is being swapped into an asset on L2 uh whereas the the spdc peg is different where you're trying to move BDC from L1 to L2 and then back in indecent library and the benefit of that is once you Bitcoin liquidity into inward

programmable uh a layer like stats then you can do all sorts of new things with it right you can you can use a Dax like a fully functional text or similar to one ethereum you have unusual and so on right okay I think that that makes a ton of sense and I feel like the last uh core piece of prerequisite knowledge we should hit uh is really the novel consensus mechanism that you all use in the proof of transfer mechanism uh can you kind of walk us through how exactly that works if you would categorize like if there are classes of uh consensus mechanism blue for transfer is very similar to approval block right it's actually very different from Google stick or some other types of algorithms

like bft consensus or so on so if if there's a family tree of sort of like these algorithms I would say forecaster is very it's like a cleaning off group of work or so right and and even the uh motivation and the history of it comes from Google work where there was this idea on bitcoin L1 back in the day and the concept of like proof of burner so you you would basically destroy Bitcoin on the Bitcoin chain um as as a mechanism to bootstrap a protocol or something right so the idea is that Bitcoin is produced to proof of work so Bitcoin is digital energy and now you can use that digital energy as input into another another consensus

protocol right so you don't have to do the proof of work again it's like uh some people call it recycled Google work because you've already done the work to kind of like uh mint Bitcoin in the in the first place so so with that in mind uh it's it when I say that it's very similar to Google work it's it's sort of like uh it's not the case that existing STX holders have any saying right whereas in in proof of stake it's the existing holders of the token that have control of the power for or running and senses that's not the case here right you you you have um basically expenditure or some sort of energy coming outside of the consensus

mechanism in Bitcoin uh case it's electricity with that is the input right electricity is the external thing that is coming into a system uh whereas in in Google transfer Bitcoin is the external thing that's coming in so people are actually bidding in BTC uh and they Place their bids they have a random probability uh that increases if you're bidding more and BTC similar to if you have more hash power is equal to work uh over here hash power is sort of like replace with um Bitcoin that you're willing to spend right so in proof of work let's say uh you want to be a big Miner you would need to have a lot of hash power and you have to burn a lot electricity into transfer if you want to be a big Miner

you have to so like be willing to spend a lot of Bitcoin and the final piece and this is the part that you know sometimes people uh have a hard time blood wrapping their head around it is that we're not actually destroying the Bitcoin like in proof of work energy is sort of like destroyed you're not doing anything useful right uh the hashtag questions are basically throw away those type questions themselves are not not meaningful so in a way electricity is being destroyed and Bitcoin is being minted whereas we could destroy the Bitcoin that's coming in for Google class for but that would be a huge waste right so the way the the system works is that

we can redirect that Bitcoin to other parties who are doing some useful work or or particles assets and right now the usual work is somewhat very simple where people lock up sdx capital and they're sort of indicating what is the right chain tip to be on but in the future the nachometer will need and then this Bitcoin rewards will be directed to folks who are helping maintain the package which is the class for BDC between the L1 and L2 because like uh it's like trying to think of the the peg signers as a third party and they're doing useful work for the decent last

protocol and they can be paid because we have this luxury that there's a bunch of Bitcoin coming into it for the calling can be redirected to other parties to incentive to do useful is that the first time you've given that uh overview before I feel like that was literally perfect so I'm sure you've done it once or twice already no I have but I'm pretty sure every time as I do it it's a little bit different description yeah no that was absolutely perfect I really appreciate that um I guess I just want to Hound in on uh one more point that we already discussed us a little bit but just to make sure the listeners are aware so how exactly is um the I guess the security budget of stacks being removed after the Nakamoto upgrade as in how you know I think it's

150 blocks you can kind of assume that the the transactions are completely finalized and settled on bitcoin but what exactly is the difference in architecture today versus what it will be post Nakamoto yeah I think it's a great question right so uh right now as of today and it's the same system that went live in early 2021 stack has a separate security button and uh I think there's some benefits to that as well like for example uh someone can argue that you know uh you're not opening up attack Vector on bitcoin L1 where if let's say uh there was a high value transaction on stacks and the only way for someone to reverse it would be to go and attack

Bitcoin someone can argue whether you're opening up your attack like your hair but now I feel like the world has changed in the last two years where uh there's there's a ton of progress on roll ups on bitcoin and almost all of those roll up Solutions are going to just follow Bitcoin panel right so I think tax is going to be part of the class of solutions which are generally so I think the future version of stats like just a side point I think it's going to start looking closer and closer to power the laptop right even even again I'm one individual contributing uh to the ecosystem but in my mind at least I think um Bitcoin changes very slowly and it might

be four or five years until any op codes or Roll-Ups are introduced so I think sax could actually evolve over time where uh in the time between now and when the new OP codes come it starts looking like what's called The Sovereign roll up and one of the big properties of a solvent roll up is that it has a hundred percent of the resistance of Bitcoin and I think um the uh so then currently uh you can Fork the stacks uh Ledger um based on how much mining power you have this tax which is the BTC part are not burned but password right right so uh let's let's walk through an example let's say that you know six blocks had

passed in in stacks and I want to create a fork uh regardless of what Bitcoin is doing I can basically just come in and say the parent of my blog is the seventh block and I'm now building a competing Fork you know some people some miners on Stacks might continue to build on the existing board but you are building a competing work and at some point you might become larger mean lower right if you become longer now the chain has a new default like long fork and you've successfully sort of like done a reorg that is six four six blocks deep right and so that's possible today after Nakamoto release someone wants to do that they will literally have to go

and Fork btcl1 to be able to do that right so you'll have to create a six block deep and then again yeah if you want to do 12 blocks deep or 20 blocks deep 100 Block C in Bitcoin it becomes exponentially harder to do it right that's why six blocks are really uh like the probability of our real deeper than six on bitcoin is like very very very small so that's I think a big big benefit of of the upcoming release and in the paper that's out there and again this paper is a working product of a working group it's a bunch of people contributed to it and you will notice that there are no Alternatives listed because it was almost like we should be less admission into instead so maybe

just don't miss anybody it's a it's a product of a working group uh the paper does talk about this 150 block but there is a competing proposal out in the community right now and I think I've discussed with some of you the challenge of actually getting even the various information in the ecosystem because of the satellite but I'm sensing a bunch of support that hey why even weigh 850 block just follow Bitcoin finality and because all of these roll up Solutions Sovereign if you had asked me personally I think I'm more inclined to do the just the six block finality than but it's uh I don't think there's

Community consensus there around that yeah interesting yeah I mean the first thing I noticed when I started researching Stacks was just uh The Forum like there's so much going on on there there's a lot of contributors a lot of people commenting all around making different posts like it's actually super cool it's a lot better than a lot of the top projects you see in ethereum so uh congrats congrats on that um yeah yeah it's it's very interesting like um I mean it's very healthy sign but I'll give you an example but let's say there's some ongoing thing that can be improved right uh you would actually see if one proposal comes up and someone says like hey our I have an RFC I heard an idea for how to improve it very quickly you would see like six other equivalents I think it's a very healthy

thing that people are independent and they're proposing their own Social Life Solutions but on the flip side of it the challenge then becomes that as a decentralized community how do you pick one of them and move forward and and and enroll it right so I think I think I shouldn't complain about that challenge I think it's a very healthy thing to have I would much rather have this then nobody cares or one in two people are just proposing ideas but I do think it I want to acknowledge that it is a challenge uh that how do you now converge different people different proposals into something that everyone agrees on and build go through the Sip process and so on so it's not the case where

you know I don't want to um point fingers but let's say you're saw in a lab then you say we think X should have them and they do it overnight right so things tend to happen much more slowly as as a little while talking because because it's decent eyes and no one is really in the country yeah no that makes a lot of sense I think governance is one of the sectors in crypto that I don't think anyone has a silver bullet for yet so by all means try uh whatever you can but I did want to stay the conversation a little bit towards s Bitcoin um just because you know a lot of projects have attempted to make trustless Bitcoin Bridges it hasn't really been done super well to date I would argue um and then I also wonder um I guess is there actually demand to

use Bitcoin and D5 and I feel like that's a fundamental thesis that you hold but then you look at the rap Bitcoin Supply or some other Bitcoin l2s that have attempted this in the past and you know none of them have really taken off so I guess how does s Bitcoin work and how confident do you still feel in people's desire to use Bitcoin and D5 applications yeah no I think that that's a great question and I would say that I've held this thesis for a while that you know people call it the Bitcoin thesis where the idea is and again it's not coming from me it's back in like 2012 2013 a lot of people believed that if there is an app or a use case that's successful on these smaller chains now those smaller things will actually

pretty big I guess theory was actually a pretty big ecosystem those things will eventually come to bitcoin and they will be more valuable on bitcoin because they will benefit from the security of Bitcoin durability of Bitcoin but above wealth and liquidity uh of Bitcoin and I think I would say part of that piece is very recently so I held on to it longer than you know people uh people would think I would right like at one point there was all sorts of Market data pointing against it like if you look at the peer in between uh 2018 to even this year a lot of Market data I would say that now we use cases out on other chains and nobody's building them on bitcoin and it's just not happening

and I think this year with with Arnold's uh and more recently with brt tourney uh part of the PC is actually to make sure right like where uh it is literally the case that the nfts the same nft when you bring it to bitcoin and you store it on the Bitcoin chain the market is valuing it as has something more stable at a higher price and people are trading it and I think there's a community of Builders coming around and they're doing it so I think it's it if you look at like some of the data for energy trading volumes and I know it depends on how you measure it uh maybe you shouldn't be excluding brc20s on that but uh on on some of these sites Bitcoin is now the number two internal trading volumes of

conductors and Solana is number three I think six months ago this would be unenological Bitcoin was a model on the map um so I would say part of that piece is playing out it is not playing it hasn't played out in deep yet right and I'm very confident in the yet because I think that it's to me just so obvious that Bitcoin is if ethereum is 250 billion of capital and I think around 33 of that is actively deployed access and Bitcoin is the more pristine right like a lot more people are sort of like brought into the idea of Bitcoin as money or Bitcoin as a potential Reserve currency and so on but it is not being

utilized and I think a lot of it has to do with just the infrastructure and the tooling and the wallets and the developer Community around Bitcoin versus any fundamental thing that people just don't want to use their Bitcoin things because there's so many counter examples right rsk for example they did their fundraising in in Bitcoin and I think 25 000 BTC came in into that race yeah even if there are some protocols on bitcoin even right now like there are these privacy tumblers that are seeing something like 7000 BTC being being used and these are crunky things these are

really clunky bad ux type things with not even that good privacy like it's the best you can do on L1 but it's it's nothing close to like a ZK based solution that has great ux and people can very really kind of like Get Well can can mix their coins and get like fresh ones out and I think if you start bringing those use cases to me it's as as obvious as putting two and two together that people will use Bitcoin those things but the challenge really is in the infrastructure tooling that ux wallet I think that needs to be much more mature and then the state uh that we are in today one of the other

interesting things kind of going on is is the idea of subnets and I think some of our listeners might be super familiar with how Avalanche uses these but I believe they're they're kind of relative to relatively similar in the in the intent and purpose of of the Subnet in the stacks ecosystem so what kind of security guarantees will a stack subnet have yeah I think subnets are one uh scalability solution that uh one company in the ecosystem hero system has been working on and the idea of subnets is very similar to animals right like subnets can be more personalized they could be more private if you want them to be so if you are a large Enterprise or you are a group of Enterprises who want to

have like you know a blockchain like system but you want wall control as well I think some Nets sort of like make sense and the interesting thing here with the way subnets are evolving in this ecosystem is I think the again because it's connected to bitcoin the unique advantages are going to be one Easy Flow BTC liquidity again so once spdc goes live uh I think you can then take sbdc from LG you can think of some lessons almost like L3 in into the subnet and use Bitcoin in there which I think a lot more people would be interested right like this is part of the thesis that Bitcoin has the best brand because the the largest kind of like Capital base so a lot more people will be interested in using BTC in a subnet than

some other asset in in itself right so that that's one part uh the other thing is that uh I think the subnets similar to the to Stacks can benefit from Bitcoin settlement so if you have a use case of like let's say it's a bunch of banks or whatever and they don't feel comfortable using Bitcoin the public network or or and they're looking at some private uh deployments subnets would be sort of like the best of both worlds for them right like they can control the family how they want but they can still do supplements on bitcoin main chain so they can later point out that look these transactions that we're talking about there's a print from the public Bitcoin Network we did they can reveal them

later on so I think the idea of these Bitcoin subnets is is pretty interesting to me I like it it's sort of like uh there's an analogy with the public internet actually like if you if you look at the history of the internet um initially they were competing standards to the public internet like people trying to build like semi-private networks or other complicated networks but the the tcpip-based public and guard just took off and then every breeds are using it right that to me is Bitcoin right like that is the simple thing that is public everybody uses it but then people instead of having their own private networks that were completely disconnected they started having these private lands that are actually connected to the

internet so they do something internally but they have access to the public network and I think these Bitcoin subnets are sort of like that right like they're not totally private they're connected to the Bitcoin L1 and but they don't uh they don't share everything they benefit from it but they don't there's some private things yeah Sean agree I think a world of subnets on bitcoin is a very exciting future to look forward to so definitely rooting for you as you guys develop that strategy out but I did want to switch tune a little bit and just cover some of the stuff that um I wrote in the research report that we published on blackworksresearch.com um there was three things that I identified so there was bitcoinmev uh reorgs and orphan blocks on Stacks the

chain and then also the stacks increase bugs so we'll start with that one um do you mind giving us just a little uh synopsis of what exactly happened yeah so I think um this is the way to think of this is um proof of transfer is implemented as a Clarity contract which has um sort of like a special it's a different from a mobile contract now let's think of that as like you know you think in terms of operating system this code that is at the kernel level is not an application not an application that anyone can develop but it's really part of consensus uh so it's the Purex one and the initial version went live um in early 2021 with the mainnet launch

and basically what that code does uh you can actually view it because Saturday is it's not compiled right so you can actually go to the Explorer view what the periods contract is how it's it's acting that the the transactions and so on and and that's the place where people lock their STX and there is basically 4 000 reward slots and people get an allocation in those rewards loans uh and look and then those reward slots are used in the consensus mechanism where instead of just burning the BTC um Bitcoin is actually sent to these four thousand addresses right and then and so and someone can actually the number of addresses could be smaller

because uh some people might want multiple slots they might be blocked and more accountable but it's basically the mechanism through which the protocol decides in a decentralized way where the Bitcoin is going right so it's pretty pretty important uh when it launched I think early 2021 very quickly I think hundreds of millions of hours ago a lot I think on average I would say uh in terms of STX I would say maybe 400 million STX is the average maybe if I've seen sort of like locked in the contract and then the price of all stand goes up or down right so the street builders that went like close to a billion dollars when it's one dollars and there have been many proposals for

impuring that uh right over over the year uh people wanted to do certain things where um let's see if I am withdrawing my Capital out and I want to relock it uh you you have to do both like a cycle and a cycle is few weeks so we are sort of like using out on the rewards that you would have received if there was functionality that said hey uh if you want to extend in my lock and not actually unlock or lose a cycle then reload that's one one functionality another is I want to leave my account a lot but actually lock some more capital on top you can't do it in the original contract you'll have to move Capital to a new address then log as a separate

address and maybe you don't have enough Capital anymore right to get a slot whereas if you could combine with the previous one it might have been easier or something so think of that as various improvements that the community had that that should be there so over time a new version will develop pox 2 and again I mentioned like the long process that happens in the decentralized community like how is this this is going to go live it actually took a while to go live like almost I would say ideas that were there you enjoyed in Day 2021 it went live like six months ago or maybe even less uh so that was the first major upgrade to the pox contract uh and it worked fine for a while until someone triggered a bug right and the

bug was that someone for the first time called uh this function called stack increase what the function do does is that I have some calf a lot and I want to put more capital on top of it and the way the bug worked was and that it was um it would give you more reward slots than you you have or then what you should get right so there's a bug in the code and what it's doing is for anyone who called Stacks increase you get disproportionately large number of towards Lots others so people can either repeatedly call at to the extent that

you enter weird scenarios where the total Supply block is actually higher than the total circulation of sdx right it's a bug it's a it's a pretty sort of like a bad bug in a way because it's impacting the rewards the people are getting because now someone has almost these Phantom Capital lock you don't actually have the capital the protocol thinks that you have a lot of capital lock and the rewards that should be going to other people um they are now Affiliated to you right so I think um the net impact of that to users is their for rewards for that cycle go down but realistically practically people have experienced that several times for

various reasons right like sometimes the stocks price goes down so the rewards go down sometimes you know a lot more Capital gets locked for a particular cycle like 500 million 600 million whatever numbers and they get less rewards so I think for the average loser my take was this on the forums and Twitter that people weren't that concerned they're like okay fine I'll get lots of rewards with cycle but the abuse rewards was basically like rewarded a bonus that they're getting on top and it's not not like hey my capital is at risk and I I want to differentiate between the two things the bug wasn't that your Capital can be stolen like it's like hey you'll you received less rewards the cycle and then uh in the in the protocol code there's a general design philosophy that

if anything goes wrong with POS whatever it might be the protocols are so like reverse back to birth like burning is the safe place you go back to where something goes wrong so this is how the community sort of reacted they're like okay something went wrong there's a bug so we're gonna reward back to Burning uh because you don't require any Community consensus or setup rates for that that's sort of like already picked right that's the default Behavior Uh so the protocol reverted back to burning for one or two cycles uh two cycles I believe and then a new upgrade was shipped um that fixed about and bad net that went live and I think very quickly that 300 400 million sdx capital I think it

all came back I think right now we're back to 400 million States locked great thanks for that uh in-depth explanation so I guess something I gathered from this was how does Bitcoin been live since Stacks sdx stackers are charged with maintaining the peg signing pagans Peg outs honestly if the STX stacking contract thought that one entity had way more STX than they actually did couldn't they have signed a dishonest Peg out and then as a follow-up question why couldn't someone you know stack a bunch of STX short the sdx and then sign a dishonest Peg out

yeah so I think I think the request and let me selected them out so for the first part um there are effectively different maps that are maintained for for what the state of the sdx locked in is and there were a bunch of those maps that were accurate and only one particular one that wasn't right so the spdc impact wouldn't be there unless it was a different type of a bug where the spdc specific information is corrupted somehow right so so just just like very specific on this but it would not trigger it because it did not trigger some of the other functionality that was using the estate supplier is it locked or is it is it not

law right um that's that's one thing but I do think that the theoretical attack Vector that what if the knowledge of the protocol for what the with the supply and lock doesn't get corrupted I think this bug wouldn't have done it but um it is it is theoretically possible that it can be done so I would I would say that the the the the the response to that is I think this is one of the areas where actually having Clarity helps because the code will not compiled the one you will actually uh focus on safety the language has a lot of tools that can help you uncover these sort of bugs even before you deploy this over here I think

that retro that the core devs did was more around just better testing was needed like the language has the capabilities to try and find these bugs even before you deploy the code but not enough testing was done even even before deploying this right so that was one of the learnings in the in the ecosystem so what I would say is that fundamentally any piece of software can have Bots right so sptc uh uh for this type of a bug that hits the supply is actually different from what the reality is I think it can occur anywhere but I would argue that two things help one is Clarity the language itself helps actually helps a lot like this is where you take the hit on the challenges of

developers leaving leading a new language and third-party integrators is like taking longer to integrate but this is actually one of the benefits right where you can give better safety and the second thing is that I do think that um Real World um like testing and use of the protocol levels right so this contract the previous version was live for like two years and nobody discovered a bug and then it was actually an upgrade that caused the bomb right here so it's a little bit like um my again this community might I don't control everything but might end up doing something different but my view is

that as sbtc goes live this particular contract actually gets hardened over time and doesn't change this is not one of those places where you introduce new features every two months or every year right so if anything this this bug in a way glad that it happened now because it taught a very expensive lesson that this is that part of code where you don't want to change it that much you want to test it a lot and then you want to leave it alone let it Harden and not not make any changes so I think I think that that can that can be helpful and while the other part of the the question about generally can you impact um by market dynamics or not right so I

think uh there there are two parts to it one part is that sptc current design is sort of evolving towards a place where a lot of the parties that are involved or custodians who want to be signers and so on they all are feeling much more comfortable in a position where at least 30 percent of the lot Supply is sitting with let's call them institutional custodians you know they might be the coinbases or Bitcoins type parties or large exchanges and so um if that is the case if 30 of the supply is sort of like sitting with people which we're going to assume that

they're not going to get hacked right because if they get hack our industry has like a much bigger problem than just the SB the feedback uh then I think it's a it's an interesting dynamic because it is still the open system anyone can become a signers there's very decent lies anyone can kind of come in go but you have a backstop you know that at least 30 of the supply is sitting with with people or institutional they are professionals and they they get hacked like we'll have bigger problems right so I think um I I sort of like that design uh I think if that is true by the time SPD C goes liar but other than the economic incentives part of it looking just having that 30 Supply in the hands okay

will be physical probably would be very helpful and and then if you forget about this argument generally speaking yes you can so like short STX try to borrow a lot but if you just run through some of the numbers um there was some Market reality today uh I think binance is the largest exchange and I believe that I went checked like recently but maybe a couple of weeks ago that's just like 120 130 million sgx okay so the total liquid supplier and exchanges and you can add up all the other exchanges the total liquid Supply on all exchanges is maybe 40 of the loss capital and consensus right now so even if you buy everything

that's kind of like floating around you wouldn't have majority power around that on the tech so that's that's it that's not a strong argument in the sense that maybe stocks becomes more liquid it's a it's a ratio between what's locked already and what's available and historically I think the liquid supply has been pretty small obstruction of uh of the distribution and the question would be if an apple grows like how does it change and I think as long as the log Supply is very healthy like a very large percentage is locked uh it would be hard yeah it's interesting that you mentioned that as well because you know Thor chain kind of has this similar problem another problem

but like a circumstance it has to think about where you know you could kind of run that same shorting attack on Thor chain and and it would be profitable in in some in some ways so it's kind of like so they made some interesting design decisions that kind of helped incentivize the ruin which is the Thor chain token to stay within that ecosystem and so like they aren't IBC compatible as a cosmos based uh chain which guy was like all right that'll help prevent going to like Mars for example or some other lending protocol in that ecosystem but like they do you know the community is very aware that like the amount on finance and other exchanges like is this important metric do you have any like mechanisms to maybe help incentivizer give reason to keep the STX token within the like actually

on chain and instead of going to these uh centralized exchanges yeah so I think the the biggest one in the Bitcoin yield right like if you if you look at the Stacked ecosystem I would say by far the largest number of users using anything in the in the protocol or yielding up the Bitcoin you yield is by follow the number one thing so if it's the case that I think maybe 30 40 of the supply is locked right now but and I I generally categorize Stacks as a small ecosystem right now uh and I think as the ecosystem grows um maybe you know more to fifty percent of the supply of Love anyway um so I think that that would be a

pretty Elite place to be in and I think right now uh people are sort of like walking Capital yes it has these side effects of like you know your signaling to the protocol and so on but with sbdc you're actually doing active work you're running nodes you're signing actively so from the health of the ecosystem perspective if more capital is locked and more full nodes are there and more people are actively science but it's actually very healthy and then as a byproduct it also reduces the chance of these these attacks where you can go and buy a very large portion of this Appliance yeah that makes a lot of sense um I do want to Pivot real fast because I know we're running up on an hour and I don't want to take too much of your time

but I think the bitcoinmeb situation is absolutely fascinating so for the listeners a little bit of background F2 pool large Bitcoin mining pool operator they have like 15 of the supply um and they have been censoring out other um proof of transfer miners by only including their own transactions so then they can essentially bid a lesser amount and still win the stacks rewards and they'll win because there's no competition so there is a proposal live to implement a minimum amount of uh Bitcoin that needs to be sent to sdx stackers in order to ensure that they're earning the rightful yield so it sounds like a pretty good idea but at the same time the way I see it is um because F2 pool has the ability to

um exclusively mine blocks at certain periods of time they could theoretically uh censor L2 users which they're not doing today but they could and then on the same token um it doesn't change the fact that if it's still profitable for F2 pool to be doing this um why wouldn't they continue to do it so I'm just curious to get your response on those we need this thing is basically a thing when the system was going live uh the core dogs and about the people including myself or designed that there is a potential um here where if a Bitcoin miner becomes this x minus they can actually mine almost discounted rate right like right there they're

basically foregoing distance activities that they could have collected and they're getting sdx cheaper than other groups and at that time interestingly the idea was this is pretty nokomotor design right so the idea was that if you convince all of the Bitcoin liners to do it in a way it's actually a good thing right because now 100 of the Bitcoin cash power is actually securing securing the L2 um and that's what's optional bad and then later on people figured out people get the 100 of the Bitcoin has power anyway and through the Bitcoin finality path instead of trying to convince the Bitcoin to do it and I think what's a cleaner better better better way again and and obviously you want to use these rewards so in the old

system I would say um some of the sake soldiers not getting these rewards to me exactly not not that big of a deal like we are prepared to build applications and use them and those applications needs to be useful but I do agree that for spgc and sbdc weren't there do you think this yield is actually more important at least to me because it is now in the center for a speech season and I think that's a very big potential uh problem if you solve it well meaning that there's really smooth transfer of Bitcoin between L1 and 2 and add decent lines away as possible today young people have incentives to do it because

they're earning different rewards I think that's a very helpful so it's a long way of saying that I wouldn't have been concerned about this but something like in 2021 it may be fine then all miners start being engaged with only bringing more security to a chain and number eight right so uh now the best PDC designs and the building extension but at the same time like my view on this is that the miners are able to do it because of the protocol rules right and they specifically allow them to do this and with minor tweaks and those rules you basically take away the rewards and there again I mentioned earlier that when there's a problem you know six decision proposals come out and that is literally what happened with this thing as well like everyone have

their own proposal of you know what can be done but all of them are uh think of that that says they're trying to pick a point on a curve or how to um pick the minimum right so they're interesting proposal there should be 90th percentile of the average of the last X blocks and so on and people are actually not running models and getting interesting analysis and calculations but if you zoom out a level well they're basically but basically the the protocol group says yes the miners scale minus the same right so they will have to be actually transferring BTC and B in my health uh they might have like a so right now if

let's say um they're only foregoing that that Bitcoin field that they could have collected and they're mine for right on any personal discount I think in some of the proposal their discount goes down to even below one percent right so they're really big it's slightly likely that so they're not their economic cost is very similar to a normal right so for any rational actor they will only do it and it makes economic sense though for them to do it and then I'll I'll post like two other things in terms of uh potential impact on other years so I would say that Bitcoin miners as a category always have the ability to try and mess around without it is Freeport lightning

stream for stats you speak or any other future out you that might come so that's not a new thing that's basically like saying um there's a malicious book that is but it did malicious or somehow they're motivated by some profit that they can make and our over there typically what happens is that your belief is that Bitcoin or or in Center compatible system um had other rational actuary David from terminal for whatever reason doesn't want to do

right that just means that I'll have to wait one more block right the next minus enter it and I'll go in and I will use about BDC and similarly unlock out exactly it's fine the next one and and but but there but I think the question would be why we're going to have to do our law because they're just leaning out of the countries there's no and that is too bum to not correct they see uh because it's unclear to me what type like over here there was a clear balance right the protocol dudes basically said that if a minor uh the coin Miner doesn't they will earn more money right let's start off like uh money was at the table nobody was corrupting and a lot of people

soundtracking it on that issue uh with people have been a war off for two years now there's a little bit of sense of urgency acquired life have any other miners indicated that like I guess it only F2 pool just out of curiosity or is anyone else kind of like noticed this opportunity and kind of stuck their hat during as well so so far it's only Optical um and I think uh there's and there was might do it as Raw it's also like in the grand scheme thing not a lot of money right like if you're a miner there is some over and this was my argument for why this wasn't an emerging issue there is overhead you would need to learn Snapchats you would actually the cost there the cost of people came into I like you you need somebody who is

spending time and I've heard running the minor optimizing it in an upgrades coming you have to upgrade if they're doing that as protocol and so on so if you look at in terms of how much money they're making the order of like I don't know hundreds of maybe thousands of dollars per day if you're a large minor that's not a lot of money then you start some birthday contents biology they're making making sure that fascinating um I did get a question inbound on DMS asking have you seen an increase in stocks mining competition over the last few years he was wondering like what your steps are to increase that competition um and I know I'm throwing a lot at you

right here but I I'll let you answer that one real quick and then I'll get you my last one yeah I I think that um minor decentralization is a a is a big thing it's super important uh one thing that happens with tax 2.1 and there's the ability for having decentralized right so many different people can pull together and they're still sort of like doing uh one combining transaction so the main limitation is really economics on the l1c uh for example let's theoretically run the numbers right let uh we actually don't want to consume like 10 of Bitcoin bandic once tax mining like a lot of people would be yelling at us if you do

that right like so so if Bitcoin does it how when Keith how winter vouchers um per block you don't want 200 miners getting tax money yeah 100 200 500 games but I think this protocol is the way just the constraints work and then there's always a question of Bitcoin fees uh if a lot there's a ratio between how much money is going to fees and how much money is going to be this year report if you do get 200 miners it actually means that a lot of the money is going to feed which me as a bitcoiner is happy that Bitcoin miners will take money that also means sbtc announcers okay so that's the flip side effect so so to me also looking at ordinary how

Bitcoin fees are very Bitcoin fees are heading I actually think that Bitcoin fees are going to become like bigger problem scissor than minor translocation right because if Bitcoin C spied to 500 SAS with it there or in this bike to like a thousand packs then very quickly that single thing will be impacting sptc rewards and more than anything else right um on that's why I'm more excited about some proposals that contributed to some of them which are now trying to view the next upgrades or versions of stats as seniority like how uh the develops genes have sequencers right and then there's a sequencer that just publishes data on the on the L1 and there you all go so

you can understand there's a different type of mining that is actually more decentralized but the L1 footprint of that money will not be by tomorrow right so in a way let's call them code and code list to mining process away from that one you you're still benefiting from Bitcoin finality and Bitcoin reorder that you're sort of like less time dependent on how much is Bitcoin Bitcoin fees and miners are always thinking about um the maximum number of miners a factor of how costly it is to send trundling kills on bitcoin because if you just miss all of this one and there's almost like a sequencer running then there can be many more parties who are

participating in mining without increasing the countries that are that they have to take awesome thank you for explaining that um I will hand it over to you again we need thank you so much for coming on if you want to touch on really quickly the uh reorgs and orphan blocks by all means get your two cents in but other than that if you just want to tell people a little bit more about where they can contribute learn more about you um maybe your Twitter handle that'd be great yeah so I think very quickly on on the on the reord stuff I would say um that compared to minor uh efficiency and centralization I would say the decentralized money tools are short-term thing that can be impactful right now there's already I think brands in the

community what you do ours is it will help long-term you know I mentioned that looking closer to like a sovereign block issue uh I view that as a very very temporary thing often blocks specifically have always been around that the orphan blocked weight actually hasn't increased uh what cause recent concerns were there were some arsons that were just deeper quotes right so blocks aren't getting offered at a higher rate than they have been

historically right they're great it's somewhat constant but what happened recently was that some of those individual plots were just deeper so so that raised more concern and that's no longer happening there are many small time upgrades happening that help that situation but one of the reasons I personally that's concerned about it all of that is going away with my camera release and like it occurred because the Bitcoin finality is changing that explicitly means that orphans just go away Bitcoin decides what is a valid block so you will only see a reports for the small six block between then that and then those floats will disappear just like the compost disabled so we so it's

a like I personally wouldn't want to spend too much time on a problem that is not that bad honest doing whatever it's an upcoming upgrade anyway uh in terms of like Market building I would say I cannot emphasize this enough that this is very very different well it is very decent line there are the healthy community and I think people want to get involved and I think we have been sort of like pioneers and Bitcoin building on bitcoin and Bitcoin out in space and now there's a Revival right like ordinals and other other exciting things happening um spdc to me personally is or one of the most important things that can

happen I think once people to see the coin sample after being declared and the lead in an easy fast way I think that's going to be a big aha moment for the industry the client Bitcoin has actually oh you go defense Theory I want to eat you know it's I'll studies and the UN PCB and uh generally always interested in building on bitcoin so if you're interested in that I think we will uh be sure to put those links in the show notes as well so everyone all the listeners can easily find you and and the great work you're doing so thanks again this is a great conversation we really enjoyed you coming on today [Music]